e-commerce and parcel delivery -...

Ninth bi-annual Postal Economics Conference, Toulouse

1st April 2016

E-commerce and Parcel Delivery- Dr. Henrik Ballebye Okholm

E-commerce and Parcel Delivery

2

Agenda

• Policy context

• E-commerce development

• Consumer demand

• Parcel delivery

• Pricing

• Conclusions


3

Agenda

• Policy context


Why political interest?

4

● E-commerce fits perfectly with the vision of the

Internal Market

● Three challenges

o Lower level of service for cross-border delivery

o High prices for cross-border delivery

o Small webshops pay relatively higher prices

Policy context


An evolving policy debate

5

Policy context

Promote cross-border e-commerce

within the EU

“Cross-border parcel delivery is an important factor in e-shoppers’ and e-retailers’ decisions to buy/sell online”

”Why does it cost €27

to send a parcel from

Copenhagen to Malmö,

but €42 to send an

identical parcel the

other way?”

Since 2012

Launch measures to improve price

transparency and regulatory oversight

of cross-border parcel delivery.

May 2015

No price regulation for now, but enhanced

transparency and monitoring of price data

o Econometric study

o Pressure in the media

Dec 2015

”The big differences

between prices for

cross-border parcel

delivery between

various EU

countries just do

not make sense.”

2011 FTI study on cross-border parcel prices


6

Agenda

• E-commerce development


E-commerce landscape is highly dynamic with large cross-country differences in e-commerce development

7

15%2008-2014

E-commerce development


BUT assessing the true level of cross-border transactions is a challenge

8


15%Erroneous consumer perception

Cross-border purchase ≠ Cross-border

delivery


What is cross-border e-commerce?

9



10


Source: CIVIC

Large differences in the number of online buyers per country


Many drivers of cross-border e-commerce

11


Drivers Demand side factors Supply side factors

Experience/ Trust

• E-shopping experience• Quality of goods and services• Consumer awareness of cross-border

consumer rights

• Possibility of branding • Online selling experience

Regulation • VAT differences• Regulatory compliance• VAT differences

Geographic/ Cultural• Home market size • Language• Home bias

• Home market size • Language

Technological development

• Broadband/internet penetration• Digital skills

• Broadband/internet penetration• Digital skills

Operational • Delivery times • Delivery logistics

Clo

sely

in

terl

ink

ed

/ o

ver

lap

pin

g


The European e-commerce landscape is highly dynamic, and the development of e-commerce is influenced by many factors.

12


13

Agenda

• Consumer demand


Choice

14

Consumer demand

●1980: 1 type of salt ●2016: 5,170 types of salt


Cheap, fast and convenient

15

Consumer demand

28

28

15

11

18Other

Flexibility of delivery time (e.g. Scheduled)

Alternative delivery destination (e.g. parcel locker)

Price of delivery

Speed of delivery (e.g. same-day)

What is most important for you?

Note: Included countries are Austria, Belgium, Denmark, Finland, France, Germany, Netherlands, Norway,

Sweden, Switzerland, UK.

Source: McKinsey & Company


Choice: Cheap, traceable, time certain

16

Consumer demand

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Express delivery

Next day delivery

Delivery within 2-4 days

Delivery at agreed time slot

Evening delivery

Saturday delivery

Delivery to the home adress

Delivery to work adress

Delivery to post office

Delivery to relay point (shop)

Delivery to parcel kiosk (automated locker)

Track'n'Trace

Electronic notification of delivery (e-mail or SMS)

Insurance related to delivery

Cash on delivery

Free delivery

Standard delivery

Faster but more expensive delivery than standard delivery

More convenient but more expensive delivery than standard…

Take return parcel to a post office/collection point

Organise a specific pick up with the delivery operator

Track'n'trace of return parcel

Return product immediately at the moment of delivery

Tim

e o

f delivery

Poin

t of

delivery

Valu

e a

dded

Pri

ce

Retu

rns


Control

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● Consumers want to be able to decideo Who, where when and how

● But 40% of all consumers did not have

access to important delivery services with

their latest online purchase

● Largest gap

o Return options (55-65%)

o Flexible delivery point (~50%)

o Information (45-50%)

Consumer demand


Dynamic e-commerce spills over into the delivery sector

18

Consumer demand

Alternative

delivery locations

Track & trace

Predictable deliveryE-retailer diversity

Industry specific

solutions

SME offers

E-commerce value

chain

Interactive

delivery

Parcel lockers/

PUDOs

Real-time tracking


User-driven innovations

19

Innovation in various aspects

Delivery aspectE-shopper demands

Market response Examples

Time and speedMore predictableparcel delivery

New tracking features for better predicting parcel delivery times

DPD predict interactive delivery serviceGLS Flexdelivery

Delivery point

25% of consumers prefer delivery to alternative delivery locations

Roll-out of alternative points to home delivery

Parcel lockers and parcel shops

Value added featuresand return options

Track and traceand electronicnotifications are important

Development of real-time tracking and mobile returns

DHL real-time eTracking

Consumer demand


Innovation promoting convenience

20

Consumer demand

Four Steps

1. Order food and grocery

online

2. PostNord locates the car,

wherever it is (in

Gothenburg)

3. Digical key gives PostNord

access to the car trunk

4. IFoodbag system secures

cooling and freezing 24hours

Cooperation between e-retailer Mat.se, Volvo and PostNord


Consumers want choice and control.

The dynamic nature of the e-commerce sector has a positive spillover into the delivery sector.

21


22

Agenda

• Parcel delivery


Delivery decisions by e-retailers play a pivotal role in consumers’ delivery choices and prices

23

Parcel delivery

1. Choice of delivery method

Variety of delivery options

• Direct cooperation

• Consolidator

Deliv

ery o

pera

tor

Co

nsu

mer

E-retailer

• Size of the e-retailer• Products sold• Stage of development of the e-retailer• Complexity vs. customer needs

• Direct injection

• Self supply


E-retailers of all sizes are well-aware of alternative delivery operators for cross-border delivery

24

Parcel delivery

8 5

DHL

DPD

GLS

UPSFedex

Bring

DB Schenker

DHL parcel

Hermes

Local couriers

Relais colis

Colis privé

Amazon

Uber

Ebay

bpost

LaPoste

Posta Slovenije

NRA awareness E-retailer awareness


Who are the main players?

25

Parcel delivery

Global

Regional

National postal

operators

https://www.google.dk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjvpMPt1cHKAhXJfiwKHVlOC2sQjRwIBw&url=https://ideasinspiringinnovation.wordpress.com/2010/05/03/logo-corporate-identity-doppelganger-of-famous-video-game/&bvm=bv.112454388,d.bGg&psig=AFQjCNFiKYytjCr4SERJnCW_Klf2Bv43mQ&ust=1453698157622884

https://www.google.dk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjvpMPt1cHKAhXJfiwKHVlOC2sQjRwIBw&url=https://ideasinspiringinnovation.wordpress.com/2010/05/03/logo-corporate-identity-doppelganger-of-famous-video-game/&bvm=bv.112454388,d.bGg&psig=AFQjCNFiKYytjCr4SERJnCW_Klf2Bv43mQ&ust=1453698157622884


Direct injection

26

E-shoppers buys product

Product shipped from warehouse

Product transported cross-border

Parcel injected in postal network as domestic parcel

Parcel delivered to e-shopper

Parcel delivery


E-retailers have ample choice in delivery operators, delivery modes and delivery routes

27


28

Agenda

• Pricing


DG Growth: “You’re shopping online. You’ve found the perfect gift. You're at the checkout, and then… Delivery charges are how much? Forget it!”

29


Delivery decisions by e-retailers play a pivotal role in consumers’ delivery choices and prices

30

Pricing

1. Choice of delivery

method 2. Choice of pricing

Variety of delivery options

• Direct cooperation

• Consolidator

• Direct injection

• Self supply

Many pricing options

• Free delivery

• Pass-through

• Mark up

Deliv

ery o

pera

tor

Co

nsu

mer

E-retailer

• Size of the e-retailer• Products sold• Stage of development of

the e-retailer• Complexity vs.

customer needs

Commercial decision based on cost & demand factors


Mystery shopping experiment design

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Pricing

• 20 trade flows

• Low/high weight goods

• Small/large e-retailers

• Comparable delivery prices

How much does the price charged by the delivery operator to the e-retailer for delivery influence the price charged by the e-retailer towards the e-shopper?


Low correlation between prices charged by e-retailers and the public list prices

Pricing

correlation coefficient

0.45

0

5

10

15

20

25

30

35

40

45

50

0 10 20 30 40 50

E-retailer

price, €

Public list

price, €


Prices for cross-border parcel delivery paid by e-shoppers generally do not reflect the prices charged by delivery operators, due to the decisions of e-retailers

33


Delivery prices are determined by a multitude of different cost factors

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● Economies of scale

o Delivery volumes

o Population density in the destination area

o Value added delivery features of delivery

services

o Interoperability of postal networks

● Product characteristics

o degree of preparation of parcels by the e-

retailer

o characteristics of the goods delivered

o Choice of a value added service

● Business model of the delivery operator

● Labour costs

● Geography

● Exogenous factors (oil prices, currency

risks, and traffic congestion …)

Pricing


Delivery pricing is a commercial decision

35

Pricing

Uniform pricing

Market-based pricing

For simplicity reasons

• Typical for industries with large fixed/ common costs

• Consumer price sensitivity depends on various factors

Missing link between cross-border prices and

cost levels in destination countries

Public list prices seldom apply


Why is the price of sending a parcel 132 km from Cologne (DE) to Liége (BE) almost three times more expensive than sending an identical parcel 579 km from Cologne (DE) to Berlin (DE)?

36

Look at the right kind of distance and other factors

Pricing



37


345km

Average cross-border

distance

Average domestic

distance

Pricing



38


CologneLiège

Brussels

Riga


As in any other sector, pricing is a commercial decision in the delivery sector, driven by a number of cost- and demand factors, such as willingness to pay and volume flows

39


40

Agenda

• Conclusions


Conclusion

41

European e-commerce landscape is highly dynamic and

has a positive spillover into the delivery sector.

E-retailers have ample choice in delivery operators, delivery

modes and delivery routes.

Prices for cross-border parcel delivery paid by e-shoppers

generally do not reflect the prices charged by delivery

operators, due to the decisions of e-retailers

As in any other sector, pricing is a commercial decision

in the delivery sector, driven by a number of cost- and

demand factors, such as willingness to pay and volume flows.

e-commerce and parcel delivery -...

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